Friday, 15 August 2014

The World Health Organisation has landed another blow on Kenya, its already struggling tourist industry and its primary airline, Kenya Airways, by declaring the country an Ebola risk because it is a crossroads of many West Africa originating passengers' travels.

It may be, but who knows by what route anyone possibly contaminated person may try to flee the place where the disease might have been picked up?

Why has the WHO not gone the full distance and nominated all the major transfer points of West African travellers? If they are medically are serious rather than alarmist how about Addis Ababa, Johannesburg, the Gulf airports, London, Paris and Amsterdam? What's so special about one particular airport in East Africa where the disease is not endemic?

As always in Africa the news is a mixture of
excitement, new startups, governmental and other nonsenses, steady progress and
some poised at a possible descent into an uncertain future. Some old problems
get resolved, some never will be and new ones come into view.

Here’s some of what’s happening….

On June 23rd we posted an item headed “Africa,-up
pop the regulators”. Sadly they are still up. This rash of breakdowns between
the regulators and the regulated continues to wreak its havoc. Air Uganda, – an efficient private sector
airline with an expanding regional network, - has ceased operations, returned
its aircraft to the lessors and laid off its staff. That’s what happens if,
overnight, overnight the regulator, in this case the the UCAA, revokes all
national AOCs for international operations because of an adverse ICAO report on
its own oversight. In the six weeks since then the UCAA has resolutely remained
silent and let the businesses collapse around them.

In a not dissimilar shot-in-own–foot kind of move, the
Namibian authorities suddenly closed Windhoek’s international airport to
widebodies with immediate effect. No notice, consultation. Nothing. For Air
Namibia as “immediate” did actually mean “immediate” their inbound A330 from
Frankfurt had to make a late diversion to Gaberone, Botswana. The airport’s
emergency response services for large aircraft had been found deficient in
ICAO’s recent audit. Air Namibia has now re-based Frankfurt flights at Lusaka
and is shuttling passengers to/from Windhoek on smaller A319s. Maintaining
operations to Europe is crucial to the inbound Namibian tourism market and this
isn’t a great way to do it.

Africa presents many difficulties to operators but
these two incidents point fingers clearly at the regulators desperately and
precipitately trying to cover their own deficiencies regardless of the
consequences. These weaknesses didn’t
suddenly occur on the days of the inspections. Nothing changed between the
minute before and the minute after the imposition of the bans. The deficiencies
were there already and may have been for a long time. They should have been
recognized and remedied as a matter of routine irrespective of ICAO
audits without the need for any precipitate and show stopping actions.

So as to make sure that the buck stops as far from the
central government regulators as possible, the senior management of the state-owned
Namibia Airports Co have been dismissed even though until the moment the ban
was announced they had all the required government approvals.

Away from the regulators but still in the zone of
things governments have to do better , escalating regional security issues and
resultant adverse Travel Advisories by the USA and UK in particular have hit
Kenya inbound tourism volumes. Kenya Airways’ Kenya destined traffic has been
particularly badly hit and the airline is swiftly refocusing more of its
efforts on pulling in over Nairobi more 6th freedom transfer
traffic. This is inevitable but again highlights the weakness of Jomo Kenyatta
International Airport. Substantial funds for redevelopment have been allocated to
it over the past 15 years or so but there is little to show for it so far. The on-going
deliveries of B787s of which 3 had arrived by the first week of August leaving
6 to come, are a bright spot. The airline could though have done without the Government
sticking out an unhelpful foot by imposing VAT on new aircraft and spares. Just
when the airline perhaps thought things couldn’t get much worse they did. That’s
what governments, always salivating for more taxes regardless of wider national
issues tend to do. In Kenya, the July imposition of visa requirements for South
African nationals just when there was an urgent need to boost tourism to
replace the vanishing British and Americans, was just another example.

North and West African stability and security issues
are also causing jitters. Egypt looks wobbly and tourism is depressed. Egyptair,
a sixth freedom as well as point to point operator since its Viscount and Comet
4C era in the 1950s and 60s is, like Kenya Airways, now refocusing increasingly
on sixth freedom transfer business over Cairo and on intra-African routes.
Ndjamena, Chad, is the latest, some might say courageous, new destination.

Libya faces increasing aviation isolation. Its airspace
is now effectively closed and Tripoli Airport partially destroyed. This just as
the country and the airline were beginning to get back on their feet after a
previous upheavals.

Some non-African
carriers are reducing African points of call. Royal Jordanian is withdrawing
from Lagos having already dropped Accra. Emirates is withdrawing from Kano
after just a few months and Delta is dropping Monrovia.

The emerging worries about Ebola fever are not going
to help West African aviation either. Alarms about the disease moving across the
region have caused travel to slow down markedly and foreigners are delaying
inbound travels.

Bucking the negative trend in the true spirit of the
former Sabena, Brussels Airlines is increasing some frequencies. They know that
yields soar where others fear to tread and they are consistently undaunted by
problems from which others shrink. They stick with medium and long term
strategies and don’t rely on short term tactics. Where others have come and
gone they have generally hung on through thick and thin over several decades.
This has not gone unrewarded in political trust and appreciation. Unlike some
others, the Belgian flag carriers are not seen as just a just a fickle fair
weather friend. They thoroughly deserve the success they get.

A carrier less familiar with success is State-owned
Air Tanzania which has progressively declined since the short-lived 49% share
purchase by SAA in 2002. SAA never got to grips with their acquisition or even seemed
to understand the airline, its home country or how to do business there. Reduced recently to a single owned Dash8-300,
a drip-feed of government financial support has enabled the periodic wet-lease
of B737-200s, an elderly A320 and currently a CRJ200. Now a challenging new mix
of Q400s, Chinese Y12Es and Embraer 170/190s is on its way, with enabling
Chinese and Brazilian bank loans. The Q400 arrivals are said to be imminent. Is
this takeoff the beginning of a new and optimistic journey or just another “go
round”? There is a big difference between loans and grants. On past performance
China, currently seen by many as a generous and friendly benefactor, is quite
clear about it. A loan is a loan and they want it repaid. In fact they demand
it. As Tanzania discovered many decades ago with the Tan-Zam railway, Chinese finance
is not a free takeaway.

FastJet had a spot of bother with co-founder Stelios
at its recent London AGM. The owner of the franchise under which the company
operates, he was not happy with the reward packages given to CEO Ed Winter and
former CFO Angus Saunders. In fact he appeared very unhappy. The company’s 2013
losses came to $80 million on a revenue of $53million and the share price was
down 83% over the past 12 months. Nevertheless Winter had been paid a total of
$794,000 in salary and bonuses (for that kind of loss?) and Saunders $412,000.
It is unlikely that new of these kinds of sums will enthuse the staff upon whom
much of the energy and success of a new startup depends. It isn’t the sort of
thing to generate a “We’re all in this together” sort of spirit especially
amongst local nationals whose pay levels are so very different.

Meanwhile the airline has expanded its Dar es Salaam based
Low Cost model operations, adding Harare to Johannesburg and Lusaka. Frequencies
are though low and not like the ambitious ones which give European LCC their
economies of scale and thereby volume generated profits from low margins. Kenya, originally planned as the hub of the
new company back in early 2012, has yet to come on line thwarted so far by
commercial and regulatory difficulties. The sell-back of shares to Nairobi-based
Fly540 is aimed to clear the decks a bit but don’t underestimate the power of
Kenya’s other operators to “not be helpful”. Why should they be? Meanwhile the operating
losses appear to remain.

EAST AFRICA

Air
Tanzania The Ministry of Transport says that 2 new leased Q400s are
to arrive shortly. In addition an E170 and E190 will follow, these two are financed
by a loan from the Brazilian Development Bank. There are also to be 2 new turboprop
Y12Es financed by Exim Bank of China. The latter are less likely to impress the
customers. The airline’s current fleet consists of a wet-leased CRJ200 plus a
single Q300.

In the meantime Air Tanzania has signed a codeshare agreement
with Interair of South Africa, who started thrice weekly Johannesburg-Dar es
Salaam services with B737-200 on 23rd June. (Jun 2014)

Air Uganda. See in
the introduction above. There is nothing to add following their 18th July
indefinite suspension of all operations due to the continuing UCAA refusal to
renew its AOC which led to the return of its aircraft to their lessors and
termination of most staff.(Jul 2014)

Daallo Airlines (Djibouti with Head office in Dubai)
has added a wet leased A321-200 to its small fleet. Their Network consists of Djibouti-Dubai/Paris/London
plus regional points. (Jun 2014)

Ethiopian
Airlines now has a daily Addis- Heathrow frequency and is evaluating
the possibility of serving Los Angeles via Dublin where there is the attraction
of the possibility of US immigration clearance being done during the transit. Even
with a resultant extended the transit time it would be worth doing as a
substantial and real marketing benefit.

To the surprise of
some, the airline’s CEO has stated that the Central Africa hub will be DRC and
their interests will include a new national carrier in the same way as Togo
(ASky) and Malawi (Malawian) which have Ethiopian shareholdings of 40% and 49%
respectively.(Jul 2014)

FastJet has sold its Fly540
Kenya shares back to Don Smith the majority shareholder. Fly540 Ghana and Fly540 Angola remain under
FastJet ownership and are currently not operating pending restructuring into
the full FastJet LCC model. The unilateral establishment of FastJet Kenya is
now the airline’s “ primary objective “(see above)

Thrice weekly Dar es
Salaam to Harare A319 services have now started with a baseline introductory
fare of $50 (Jul 2014)

Kenya Airways has announced that Mbuvi Ngunze, currently COO, will take over as
its new CEO when Titus Naikuni retires on 1st December.

The company is now
seeking $3.8 m from the Kenya Airports Authority to compensate it for the
disruption and losses caused by the destruction of the Nairobi arrivals
terminal and some other facilities by the fire.

(July 2014)

Precision Air’s switch to an all ATR42/72 fleet contributed to a
US$1.1mn operating profit in 2013-4. The two 737s were retired and their
cash-consuming Johannesburg jet route withdrawn. (Jul 2014)

SOUTH / CENTRAL AFRICA

Air Namibia had its AOC renewal application renewal
rejected by the CAA on 16th June. The Board then suspended the MD and
the GM Airport Services .The CAA then on 14th July granted a 2 week
dispensation to rectify operational shortcomings thereby enabling flying to
continue although MD Theo Nameses remains suspended. Meanwhile Rene Gsponer
continues as Acting MD. (Jul 2014)

Air Zimbabwe has restored a B737-200 to service to be followed in July by one of the 3
grounded MA60s. Both A320-200s, leased
from Chinese Sonangol, remain grounded in Johannesburg awaiting maintenance.
That presumably requires at least some payment up front. There is talk of
E-Jets possibly being next to join the fleet but that would require funding.
(Jun14)

The senior management is meanwhile enjoying something of
a shakeup or maybe down. Eight, including the present and past CEOs, have now
been arrested and charged over an alleged US$10m, 4 year, aircraft insurance
fraud exposed in February this year.
(Jun2014)

ECAir (Congo Brazzaville) expects thearrival of its first
B787 in 4Q 2015 adding to a B767-300ER due in September 2014. Three further widebodies are expected in 2016-17.
(Jun 2014)

flyafrica.com of Zimbabwe’s last minute regulatory problems with the Zimbabwean
CAA caused its 23 July inaugural flight to be deferred .The plan is for a
thrice weekly Victoria Falls- Johannesburg B737-500 (Jul 2014)

FlySafair (S Africa) LCC plans to start flying
737-400s between Johannesburg and Capetown shortly. The company is a child of
Hercules operating cargo carrier Safair which has been flying ad hoc and
contract freight services for the past 40 years. (Jul 2014)

Interair (S Africa) started serving
Johannesburg-Dar es Salaam with 3 weekly B737-200s on 23rd
June. The current fleet is 3 veteran
B737-200s and a B767-200. Between them their average age is 35 years. Scheduled
services were already flown between Johannesburg and West Africa and
Reunion. (Jun 2014)

Korongo Airlines (DRC) suspended all domestic flying
when as ICAO declared all DRC navaids (VOR/ILS) to be non-compliant. This
limited flights to VFR only which is highly restrictive anywhere but especially
in the Congo. Flights were resumed on 15th June following ‘an agreement’ with
the RVA (Board of Air Transport, the regulator) on acceptable operating
procedures (Jun 2014)

SAA will, according to the South African
Government need $4.64bn of private funding to stay in business. Assuming that
it does so ,CEO Monwabisi Kalawe has signed up for advice from KPMG on who
should supply 20-25 new long haul aircraft , thought to be either A350s or
B787s. These would replace the current A340 fleet from 2017/18 A decision is
sought by October. It is intended that all will be leased. (Jun 2014)

The airline has in the meantime deleted Senegal
and Nigeria as possible West African hubs but Ghana is possible. Quite what is
envisaged is not clear as the word “hub” tends to be loosely used everywhere
but a mini base of SAA aircraft looks very unlikely. To further discussions and
on the back of Airports Company of S Africa (ACSA) committing to upgrade Ghana airports,
talks are being planned with Ghana aviation authorities. A possible joint stake
with Ghanaian interests in ASky of Lome has been mentioned but ASky deny any
involvement and as noted below under Asky where would already hard pressed SAA
find the money? (Jun 2014)

The last of its A340-200s has now been retired
and deliveries of 20 new A320s continue gradually. This enables the cascading
of B737-800s to Low Cost arm Mango.

The ICAO
downgrade of Windhoek airport large aircraft emergency response capability
forced SAA to change from using A340s to smaller aircraft on the route from
Johannesburg. (Jul 2014)

WEST AFRICA

Air Peace (Nigeria) is a Lagos-based start-up
which has been granted its AOC. Domestic operations are planned with a fleet of
3 Do328s and 4 B737-500s. (Jul 2014)

Arik Air launched five weekly A330-200 flights on the Lagos-Abuja-Dubai
route on 28th July. This was very well received by the Nigerian
Government who, in a mix of pride and protectionism, want to see less outflow
of foreign exchange to the Gulf airlines without whom the country’s global
connections would revert to their historic and more expensive “via Europe”
pattern.(Jul 2014)

Arik Air has suspended all flights to Liberia and Sierra
Leone due to the Ebola outbreak (Jul 2014)

ASKY (Togo) is seeking USD20-25mn capital
upgrade but the Chairman states
that, contrary to a SAA statement, a possible SAA stake has not been discussed.
It is difficult to see where SAA, with enough financial demands of its own,
would find the money anyway. Ethiopian
holds near 40% and its initial management contract runs until next January. (Jun 2014)

Camair-Co has reached agreement with the
lessor of one of its 2 B737-700s over disputed delayed payments. The aircraft,
which was seized in Paris in June, is now operational again.(Jul 2014)

Ceiba (Eq Guinea) has received the 2nd
of 3 new B737-800s. The aircraft are placed on the Portuguese register and are
effectively under a wet-lease agreement.

Looking
further afield the airline is planning new routes from Malabo to Lisbon and to
Johannesburg for late 2014 (Jul 2014)

DiscoveryAir (Nigeria) is another
Lagos-based start-up with a new AOC and has accepted its second B737-300 for
operation on the Lagos – Abuja – Port Harcourt triangle. Dynamism and a passion
for delivering for its customers is claimed. The white fuselage with yellow and
red wavy cheatline is smart too.(Jun 2014)

Mauritania Airlines
International received an ERJ145 “pencil jet” in June. Limited baggage space
could be a problem for it. This is to be followed by a B737-800 adding to the
existing fleet of 2 B737-500s aimed at
West Africa regional routes plus the almost inevitable Paris where it competes
with a 4 times weekly Air France A330-200. Mauritania’s EU blacklisting was lifted
in Dec 2012 (Jul 2014)

Senegal Airlines has returned the last of its leased
A320s leaving the fleet now reduced to a single B737-300 and a CRJ100, both
wet-leased from South Africa (Jun 2014)

NORTH AFRICA

Afriqiyah militia rockets and gunfire at Tripoli Airport
destroyed an A330 and damaged an A320. A Libyan
Airlines CRJ900 also written off. As
result Tripoli Airport and most Libyan airspace closed along with Benghazi and
Misrata airports and Libya is back to square one in its efforts to restore
aviation normality and get growth going again.(Jul 2014)

Nile Air (Egypt) is planning to doubling its fleet to
4 A320s to expand regional services (Jun 2014)

Royal Air Maroc has leased 4 E190s .The delivery of
the first is imminent (Jul 2014)

Brussels Airlines, As above, this heir to Sabena, the
long the justifiably self acclaimed Africa specialist with a history of hanging
in while others shrink away ,will increase frequencies to Douala, Yaounde,
Angola, Nairobi, Kigali and Bujumbura this winter. None of these will be daily
yet though. (Jun 2014)

Delta will cease Monrovia
services in September but the JFK-Accra will continue thrice weekly with B767-332ERs
(Jul 2014)

El Al is planning to return
to Nairobi in December after a 12 year absence. This will certainly be welcomed
by the Kenya Tourist Assosciation although security concerns on the Kenya coast
may be limit demand. (Jun 2014)

Emirates will increase its frequency between Dubai
and Johannesburg to 4 a day. As a link to the Gulf and much of the world beyond
that’s difficult for anyone to compete with. It can not look like good news for
struggling SAA who do not actually operate the sector but takes a small
commission by code-sharing on Emirates’ flights. (Jul 2014)

KLM is to
withdraw its thrice weekly Amsterdam-Lusaka- Harare service in October. Has the
heat of a daily Emirates Dubai-Lusaka-Harare drawn off too much of the
potential transfer market particularly to the Far East to make it viable? (Jul 2014)

Royal Jordanian will
drop Lagos services in September. This follows the axing of Accra in April.
(Jul 2014)

Ethiopia .Planning is underway for a new
Addis Ababa airport at lower altitude than current Bole (7,400ft). This would
ease Ethiopian Airlines performance restrictions and improve range and payload
as well as presumably producing a 21st century state of the art
hubbing airport. (Jul 2014)

Kenya Mombasa Airport is to be upgraded
with a new runway and terminal building. This is, against the general flow of
many African infrastructure projects to China, with the French funding 85% and
the World Bank 15%. It is optimistically described as a 2 year project. (Jun 2014)

Mozambique In the same vein, the EU Investment
Bank has agreed to loan US$26m for the upgrading of Maputo Airport (Jul 2014)

South
Africa New Public Enterprises Minister, Lynn Browne, the overseer of SAA performance, has joined
the fray in trying to get SAA back on track by demanding an end to
Board/Management ‘factional strife’ said amongst other things to be delaying progress
on the restructuring plan. As this has to be about people it is reasonable
expect some changes. (Jun 2014)

-John Williams-

Saturday, 2 August 2014

Aer Lingus' reported sharp drop in winter losses, thanks in part to increased Trans-Atlantic business of which 31% is transfer at Dublin, reveals both a success and a hugely under exploited and resourced potential market.

Shannon apart, Dublin's position on the westernmost edge of Europe, makes it the best capital city jumping off point for for the USA. It has a massive geographical advantage over its European rivals in the same way as the Gulf has for traffic flows from Europe to much of the eastern and southern hemispheres. To add to its strength Dublin is now able to provide US immigration and customs clearance for all departing passengers thereby enabling them to bypass the often very congested and sometimes none too customer friendly border officials on arrival. For all those travelling from UK and European secondary cities in particular this is an unmatched advantage. Increasing numbers are already taking it and the Irish carrier launched new services to Toronto and San Francisco last summer. Aer Lingus' range of destinations and frequencies for both inbound feed and over in the USA is though nothing like London's and at current rate of expansion it will be a long time before they get anywhere near it.

That makes it interesting to muse what a Gulf style approach both to investment by Aer Lingus and in Dublin airport could do to European trans-Atlantic travel. It would need Gulf style money too. Hello, Etihad or maybe a phone call to the recently retired President (and architect) of Emirates Sir Maurice Flanaghan to see if he would be interested in a spot of consultancy? He must be getting a bit bored by now.